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SIPP? Question

ACG
Posts: 24,237 Forumite



I have a pension from when i used to work for friends prov - its not massive but theres a bit in it. Its a new generation pension if that makes any difference.
I also have a pension from when i worked for RBS, this was one of those pensions where they base the payout on how long i work there and what my wage was - im not entirely sure on how it works but i know i undervalued its true value when i left. I have no idea how much is in this, i have requested a statement but again it should be an ok-ish chunk of money.
Im wondering if i can somehow use both of them to purchase a commercial property where i can basically pay rent to the pension pot rather than renting a property and it effectively being dead money.
The downside is, there is not enough in the pot to purchase a property outright. So i would need to get a mortgage for the remainder - can that be done?
I also have a pension from when i worked for RBS, this was one of those pensions where they base the payout on how long i work there and what my wage was - im not entirely sure on how it works but i know i undervalued its true value when i left. I have no idea how much is in this, i have requested a statement but again it should be an ok-ish chunk of money.
Im wondering if i can somehow use both of them to purchase a commercial property where i can basically pay rent to the pension pot rather than renting a property and it effectively being dead money.
The downside is, there is not enough in the pot to purchase a property outright. So i would need to get a mortgage for the remainder - can that be done?
I am a Mortgage Adviser
You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.0
Comments
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In theory you can but in practice it's not going to happen.
You'd need an ifa to sign off the transfer of the final salary pension, if rbs would allow it which is unlikely, and no ifa would sign this off as it's poor advice.
Not sure about the other pension, it appears to be a group personal pension so in theory you could transfer this to a SIPP.
There's also the problem of teh sums involved, you can gear up through mortgaging but how much a lender would prepare to lend against your effective deposit could be quite limited, certainly less than 75% and possibly significantly less.
Not sure I understand the point about paying rent, are you talking about offices for your own business?0 -
I can get an IFA to sign it off, i know a few of them. But if not i might be able to get it done on a non advised basis.
As for the deposit, the pensions i reckon theyre worth about 30% of the overall purchase price.
The bit about paying rent was just if i had to. Im going to get some offices in the next couple of months but im thinking i may as well if possible just buy a commercial property. It saves me paying dead money each month and i have free rain over what i do with it.... if i want to sub let some of it for example i can do.I am a Mortgage AdviserYou should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.0 -
Rent isn't "dead money" : "dead money" is an expression people use who don't like thinking things through.Free the dunston one next time too.0
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I think i am thinking things through. I am looking at as many different options as possible.
I think i have found the answer, it looks like it is possible to get a commercial mortgage to top up a sipp. I still need to look into a little more but it does look like it is possible - in principle at the very least.I am a Mortgage AdviserYou should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.0 -
You definitely can buy commercial property inside a SIPP and are allowed to take out a mortgage of 50% of the [STRIKE]property[/STRIKE] SIPP value. One of the critical tasks carried out by the pension scheme administrators will be ensuring that it is not a residential property and that you do not live in it. You should expect massive penalties from HMRC if they find that you are living in the property or somehow let you do it with a residential property. Buying a commercial property is very popular with small business owners, who buy the property that their business operates from. If the property has business and residential parts, like flats above a shop, only the business part can be bought by the SIPP.
However, this is not your big problem. Your problem is getting an IFA to advise you to do the transfer out of a defined benefit pension. The IFA has to accept professional liability for making the advice and the chance of you finding an IFA willing to do it is minimal to nil because by default such transfer are mis-sales and leave the IFA liable to you for your likely losses for the rest of your life.
So, the key thing for you to do is find out whether each of the pensions is defined benefit (like final salary or average salary) or defined contribution (where you can make investment choices). Forget it for the DB ones, for the DC ones it's OK.0 -
Thanks for the reply. Very helpful.
I know a couple of financial advisors - people who i class as friends.
The pension can only be used to fund 50% of the overall purchase price? That might put a bit of a spanner in the works.I am a Mortgage AdviserYou should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.0 -
Sorry, a correction: you can borrow up to 50% of the value of the money in the SIPP, not 50% of the property value.0
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Oh noooo thats even worse!
I might be able buy half a building with thatI am a Mortgage AdviserYou should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.0 -
Right, it's worse.
So far as IFA friends go, you'll find that most people here would be telling you that friends wouldn't let friends transfer a final salary pension to buy property.Don't be surprised if your IFA friends tell you that it's a bad idea and you shouldn't do it.
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I can get an IFA to sign it off, i know a few of them. But if not i might be able to get it done on a non advised basis.
Final salary scheme transfers are considered mis-sales unless proven otherwise. Even on non-advised cases. I very much doubt their PI insurance would allow an execution only final salary transfer as how would it be shown to be the right thing if advice was not given. Morally, it would be wrong to do that way and compliance wise, it would be a complaint waiting to be upheld and a possible fine and suspension of licence.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0
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